Chinese stocks are beaten down amid investor worries over China’s economy.
Exchange-traded funds focused on equities in China have seen double-digit percentage drops over the past six months, including the iShares MSCI China ETF
MCHI,
KraneShares CSI China Internet ETF
KWEB,
Invesco China Technology ETF
CQQQ,
Xtrackers Harvest CSI 300 China A-Shares ETF
ASHR
and Rayliant Quantamental China Equity ETF
RAYC,
according to FactSet data.
“Many eyes are fixed on the outlook for China as its rebound remains lackluster and its growth estimates have largely been downgraded, prompting questions as to whether the government will pursue a much more aggressive stimulus response,” said Tim Creedon, director of global equity research at Neuberger Berman, in an emailed note Monday. So far, the country has been “reluctant” to do so.
The People’s Bank of China announced on Monday that it lowered its one-year loan prime rate by 10 basis points to 3.45%, disappointing investors with the scope of its stimulus, according to a note from Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management.
China made a “measly” cut to its prime rate while leaving the “more important” five-year rate, “which sets mortgage rates there, unchanged,” said Louis Navellier, chief investment officer at Navellier & Associates, in an emailed note Monday. The country’s property sector has been under pressure, with China Evergrande Group this month filing for bankruptcy protection.
The iShares MSCI China ETF, Invesco China Technology ETF, Xtrackers Harvest CSI 300 China A-Shares ETF and Rayliant Quantamental China Equity ETF finished Monday down, with losses ranging from around 0.1% to 0.6%.
The KraneShares CSI China Internet ETF closed 0.4% higher Monday, after being particularly hard hit this month, FactSet data show.
China-focused ETFs have tanked in August, with the KraneShares CSI China Internet ETF dropping 15.6% so far this month.
Over the past six months, the fund is down 10.6% through Monday, while the iShares MSCI China ETF has slumped 13%, the Xtrackers Harvest CSI 300 China A-Shares ETF has sunk 13.5%, the Invesco China Technology ETF has plunged 15.1% and the Rayliant Quantamental China Equity ETF has plummeted 20.9%, according to FactSet data.
“There are many concerns around rising debt and defaults, a lack of confidence among consumers and businesses, and escalating tension in U.S.-China relations,” Creedon said. “Chinese leaders are wrapping up their annual summer retreat and it will be important to see if any meaningful stimulus or policy change is forthcoming to address growth concerns.”
Read: Another Wall Street bank cuts China growth forecast as rate moves disappoint
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